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Mutual Funds Quarterly

Performance Booster

By

Joe Queenan

July 6, 1998 12:01 a.m. ET

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L ost amidst the hubbub about Viagra is the question of how this remarkable pharmaceutical will affect one particular group obsessed with improving its performance: mutual-fund managers. Will portfolio chiefs who regularly use this potency enhancer become more effective, industrious stockpickers simply because they're more contented in their personal lives? Or will Viagra have a negative impact, as managers drag themselves into the office each morning, too fatigued to deal with the unromantic world of P/Es, earnings projections and technical charts?

Should fund companies be required to disclose to shareholders how much Viagra their managers use? And should the users' identities be included in prospectuses (bringing new meaning to the old saw about past performance being no guarantee of future results)?

It's safe to say that those resorting to the drug are likely to be a bit more frisky, a bit more adventurous than most of their peers. This is not in and of itself a bad thing. But there are probably millions of investors out there who like to think the people running their money are staid, subdued, not given to sudden mood swings and shifts of interest. This is especially true of those with a large portion of their retirement money in bond funds.

Certainly, those who have plunged into emerging-market funds will be neither surprised nor disappointed to find that the people managing their IRAs are using Viagra. Hey, when your future is tied to the daily gyrations of the Hang Seng index, what's a little more excitement?

But investors in fixed-income funds might be shocked to learn that anyone managing their money can get excited over something other than Alan Greenspan's latest mumbling about interest rates. Bond-fund types, after all, have a subconscious, unshakable belief that their managers are extremely predictable, perhaps even boring, creatures. The revelation that these individuals use Viagra on a regular basis could shake their faith in a sector renowned for obdurate blandness.

Because of this, the SEC just might require detailed quarterly information indicating not only which managers use Viagra, but how their performance has changed since they began gulping it down (their performance as fund managers, that is).

Such a stricture actually could have a salutary effect as a marketing tool. In recent years, some fund families have nourished the cult of personality, making Peter Lynch, Mario Gabelli, John Neff and Michael Price household names. It's not terribly hard to imagine those same companies taking bold steps to make the public aware that this or that fund manager not only visits the top brass at the companies he invests in, but always takes Viagra exactly one hour before making a buy-or-sell decision. A very enthusiastic, table-pounding buy-or-sell decision.

Conversely, more conservative funds might take out ads proclaiming: "A 34.3% Annualized Return Since Inception. Without Any Help From Viagra."

One can even imagine a high-class television ad: Two middle-aged men are golfing, and one asks: "How did your broker ever have the guts to suggest putting you in Mexican long-term paper at a time when everyone else was gun-shy of Latin America?" His companion's reply: "He asked. And besides, he uses Viagra. Eight times a week."

One tricky question: Should female portfolio managers be required to disclose the amount of Viagra used by their husbands or significant others?

Lots of people would feel somewhat uncomfortable revealing such data. Moreover, certain folks might be using Viagra in extramarital relationships, which could lead to problems should the spouse do some quick calculations.

Things might get even more complicated if drugs being developed by Pfizer, Zonagen and Abbott Labs that supposedly allow females to achieve multiple orgasms hit the market. Then fund companies might be required to disclose not only which male employees are using Viagra, which female employees are involved in Viagra-enhanced relationships and which women employees are using female Viagra, but also which managers are involved in relationships where the male is using male Viagra and the female is using female Viagra.

And you thought digging through a fund prospectus was tough enough already.

And what about the use of Viagra by fund shareholders themselves? Ace Greenberg, chairman of Bear Stearns, recently made headlines by announcing that he was donating $1 million to buy the drug for the poor. Greenberg reached this decision after reading that some insurers and state health programs were refusing to pay for the potency pill. Although the fabled executive probably made this generous gesture out of the goodness of his heart, one has to believe that if the beneficiaries of his largesse were ever to come into some money, they'd be more likely to open a brokerage account at Bear Stearns than at Merrill Lynch. Fund marketers might keep this in mind.

Another question: Should fund operators pay for Viagra use by their employees? As a shareholder in several mutual funds, I would be more than happy to help with some of the expense if it could be documented that Viagra boosted fund performance. Coming soon to a fund near you: the 12V-1 fee.

Finally, regardless of what it does or doesn't do for mutual-fund performance, Viagra could play a mood-improving role in investors' lives in the future. If a bear market ever returns, Viagra -- and lots of it -- could be just what the doctor ordered. In fact, if the next bear market is as bad as many gloom-meisters predict, investing in the makers of sex-enhancing drugs may be the only way to make money.

The author's new book, Red Lobster, White Trash and the Blue Lagoon: Joe Queenan's America , has just been published by Hyperion.

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